The expiration of options tied to over $5 trillion in stocks, exchange-traded funds, and equity indexes is scheduled for Friday during the quarterly triple witching event. This event includes the expiry of monthly contracts alongside index futures, with index options totaling $3.2 trillion expiring at the open, primarily linked to the S&P 500. Subsequently, $1.9 trillion in options related to single stocks and index-tracking exchange-traded funds will expire at the close, based on data from Asym 500.
Expectations suggest that this quarter’s triple witching will be slightly smaller compared to the $5.3 trillion notional value seen in December. The surge in single-stock options trading in March, projected to surpass cash equities trading for the first time since late 2021, adds to the potential for significant market fluctuations. This increase in options-market activity has been largely driven by semiconductor stocks, with contracts associated with Nvidia Corp experiencing high demand once again, particularly in call options over puts.
Market experts anticipate volatility in the underlying stocks and indexes in the lead-up to the expiration of large triple-witching days. The dominance of call positions on such expiration days often results in contractions in stocks. This trend was evident last week, with U.S. stocks finishing lower and the S&P 500 registering a marginal increase. Nvidia and the semiconductor sector, in general, have seen fluctuations, with Nvidia closing higher for the week but experiencing significant swings.
Call options, which reflect bullish sentiment on a stock or index, contrast with put options, which indicate bearish views. Notional volume measures the contract’s value based on the underlying asset or index it represents, with each contract typically tied to 100 shares or units. Overall, the upcoming triple witching event is expected to impact market dynamics and trading patterns significantly.